By Victor Reklaitis
Here's how 'Build Back Better' looks bullish for hospital operators, insurers, home-health companies and hearing-aid manufacturers
President Joe Biden's social-spending package still faces a long road to becoming reality, but analysts are flagging some winners in his $1.75 trillion plan.
Proposed Obamacare-related spending in Biden's proposal counts as good news for a number of healthcare stocks (XLV), according to Brandon Barford, a partner at Beacon Policy Advisors. The president released a "Build Back Better" framework on Thursday, and then House Democrats put out legislative text later.
"The biggest winner for investors are publicly traded hospitals like HCA (HCA), which have their facilities located in southern states that have not expanded Medicaid under the Affordable Care Act," Barford said in a note Friday. "The bill contains three years (2022-25) of 100 percent subsidies for those people who fall through the so-called Medicaid gap to purchase plans on the ACA exchanges."
Related:12 states still refuse to expand Medicaid -- here's why that's a problem
Insurers in the states that haven't seen Medicaid expansion also appear set to benefit, according to the Beacon analyst.
"This is several million new subscribers that are concentrated in only a dozen states and will help add to revenue for ACA insurers in those states, including companies like Centene (CNC), Anthem (ANTM), and Humana (HUM)," he wrote.
Home-health stocks -- Addus Homecare (ADUS), Amedisys (AMED) and Encompass Health (EHC) -- look like winners as well, albeit to a lesser extent than initially expected, as the bill would provide $150 billion for that sector, Barford said.
Read more:Here's Biden's Build Back Better framework -- in two charts
And makers of hearing aids such as GN Store Nord , Amplifon and Sonova should get a lot more business thanks to the Build Back Better Act, the analyst said. The legislation, also known as the reconciliation bill, proposes an expansion of Medicare to offer hearing benefits, although not dental or vision coverage as Sen. Bernie Sanders and other progressive lawmakers originally proposed.
"The hearing aid coverage, starting in 2024, is going to open up a whole new market for traditional audiologist-prescribed hearing aids," Barford said, "as they are too expensive for most seniors and with the baby boomer generation aging into Medicare, it is likely that there will be a huge need for such products due to not just past military service and industrial labor, but also the rock n' roll music that was played at higher volumes than was typical of prior generations."
What about drug makers (PJP), given past Democratic proposals on lowering prices?
Many in Washington, D.C., believe the industry is "in the clear since pharma was left out of the framework yesterday morning," but reports of a last-ditch effort on drug-pricing reforms mean that it's possible some changes could get included at the last minute and surprise investors, Barford said.
Biden and other top Democrats have been aiming to advance a big social-spending package in tandem with a $1 trillion bipartisan infrastructure (PAVE) bill that already has passed the Senate. House Speaker Nancy Pelosi has missed her Halloween deadline for advancing the infrastructure measure, but some analysts have been eyeing the end of the year as the key time for action all along.
"Despite another missed soft-deadline we remain optimistic on passage of both infrastructure and reconciliation in line with a Thanksgiving or Christmas deadline -- which was probably always the most likely horizon," said Benjamin Salisbury, director of research at Height Capital Markets, in a note Friday.
U.S. stock benchmarks traded flat to slightly higher on Tuesday.
This is an updated version of a report that was first published on Oct. 29, 2021.
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11-02-21 1000ETCopyright (c) 2021 Dow Jones & Company, Inc.